Monthly Archives: August 2015

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To heck with the Prius…

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I hope you enjoyed that cheap gas while it lasted because OPEC is now ready to dig deep inside itself to talk about the current oil situation – news that sent oil prices surging 8.8% today to almost $50 a barrel. That, my friends, is the biggest 3 day gain in 25 years. OPEC, as in the Organization of Petroleum Exporting Countries (they have a magazine!) is ready to put the brakes on its output just as the U.S. also revised numbers its own estimates of oil production. (The Energy Information Administration came up with a new way to calculate U.S. oil production and that resulted in a 13 million barrel difference from the previous method. Talk about your margin of error.) OPEC’s willingness to talk stems from its desire to achieve “fair and reasonable prices.” Which basically means, OPEC isn’t enjoying the low price of oil – due to the glut – and wants to get those prices right back up again. I suppose that since it produces 40% of the world oil output its entitled to feel this way. Of course, Saudi Arabia, an OPEC member has to be willing to play ball too. However, some experts don’t think that’s going to happen. OPEC is also hoping that these low oil prices will get people to consume more of it and maybe buy some gas-guzzling SUV’s to facilitate this idea. OPEC is estimating that oil use will rise to 1.3 million barrels per day, up from 2014’s 92.7 million barrels per day. So…about that hybrid…

Poor little rich boy…

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“The problem with getting everything is you run out of reasons to keep trying, and human interaction becomes impossible due to imbalance.” So tweeted Minecraft creator Marcus “Notch” Persson over the weekend as he lamented over his obscene wealth. He then tweeted how he feels unappreciated by his former employees: “When we sold the company, the biggest effort went into making sure the employees got taken care of, and they all hate me now.” Boo hoo. Good thing he sold his company to Microsoft for $2.5 billion. He can use all that money to blow his nose and wipe away his tears as he wallows in his $70 million, 23,000 square foot home in one of Los Angeles’ best zip codes. He also attributes his women troubles to his immeasurable wealth: “Found a great girl, but she’s afraid of me and my life style and went with a normal person instead.” And that’s totally understandable. To want to be with someone normal. See where I’m going with this? Thought so. By Monday, however, Persson’s spirits seemed to have lifted since he tweeted: “fwiw, while there are articles about my depression because I had a bad day and vented on a trend I saw, I’m sitting here having a nice day.” Good because I, for one, was worried. Maybe now he can sit around and find a solution for the oil glut?

We all scream…

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Order has been restored as Texas-based Blue Bell Ice Cream hits the freezer shelves once again. And this time the ice cream is presumably listeria-free! According to the Centers for Disease Control, the deadly virus found in the ice cream was responsible for three deaths and several illnesses and the dairy company’s products were yanked from stores. The 108 year old company now has to pull out all the stops to recover – and not just fiscally. The company laid off and furloughed thousands of employees and upgraded or is in the process of upgrading its various facilities. But if you really want your Blue Bell fix, make sure you’re in Texas or Alabama, as the cold creamy confection is only available in those parts. Stores are even betting that the demand for the stuff will be so great that some chains have limited purchases of Blue Bell products to four per person.

G.D.P-habulous…

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China might be hogging center stage for its economic slowdown but the U.S. is stealing the spotlight now for the exact opposite reason. The exciting news off Wall Street today (okay, exciting is a stretch) is that the U.S. economy grew by a whopping (not a stretch) 3.7% instead of the initially estimated 2.3% growth rate. So let’s give a big shout out to the GDP for not repeating that awful first quarter growth rate of .6% which had everybody reeling and blaming a brutal winter and a slowdown at west coast ports. Business investments also saw a 4% increase even as low oil prices and a strong dollar continue to toy with our fiscal emotions. Shares went up across the indexes and the Dow Jones isn’t looking so scary right now, having gone up 1.4%. Consumer and government spending are up too. As if government spending ever goes down? So does this mean the Fed might once again forge ahead with its unwelcome plans to raise rates? Doubtful, for September anyway. But brace yourself because that hike is on the horizon.

You can forget breakfast…

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Tiffany may have some sweet bling to offer but its earnings were anything but. The luxury goods retailer saw a 15.4% decrease in profits to $105 million, raking in 86 cents per share, a nickel short of estimates. So what gives? A strong dollar has got tourists shying away from Tiffany & Co. since they wouldn’t have been getting enough bang for their good old American bucks. However, Tiffany also saw a 21% increase in sales from Japan. The jeweler is also betting big on China, despite that fact that everyone else seems freaked about by the country’s slowing economy. Sales there are up. So clearly more than a few folks in China are plunking down lots of cash for some fancy Tiffany merchandise. Which makes perfect sense since China is the number two luxury market in the world. In fact, Tiffany is going ahead with plans to open two more stores there, adding to the thirty others already in the country and its 304 total stores. But shares of Tiffany are down 20% for the year and are currently hovering at an 18 month low. Interestingly enough (at least I thought so), less prestigious bling company Signet Jewelers Ltd., parent to both Kay and Jared Jewelers, saw some especially good earnings. Signet beat estimates of $1.15 per share to come in at $1.28 per share. Does this mean a shift in consumer preferences? Hmmm.

Off with their chicken supply…

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McDonald’s has cut ties with one of its chicken suppliers after some video was obtained from a Tennessee farm that supplies to Tyson, which in turn, supplies to McDonald’s. Unfortunately, these chicken farmers were allegedly using inhumane tactics on their farm – a big no-no if you wanna be in good with the Golden Arches. And while it was the right and noble thing to do to terminate their contact, McDonald’s still has not exactly landed in the good graces of Americans today. However, it has nothing to do with chicken. Only beef. As in a beef with Burger King. Perhaps you may have heard that today is National Burger Day. In a two page ad taken out in the New York Times and Chicago Tribune, Burger King wanted to join forces with McDonald’s on this auspicious day, put aside its McDiffferences, and offer up a McWhopper. Instead of graciously accepting this show of good beef, McDonald’s very undiplomatically declined the opportunity with CEO Steve Easterbrook writing, “We commit to raise awareness worldwide, perhaps you’ll join us in a meaningful global effort?” Can you say McOuch?

Recovery?

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It’s only right to call today “turnaround Tuesday” since the stock market seems to be sort of recovering from the fiscal slaughter of the last few days, including all those sell-offs and Monday’s 588 point Dow drop. Part of the turnaround is because of China’s decision to cut interest rates. For the fifth time. Since November. And then there are all those juicy stock bargains. Traders up for a good bargain are on the prowl and take bargain shopping to a whole new level. You might think you know how to spot a great discount but you’ve got nothing on these traders. These deals have nothing on post-Christmas sales. But at least the Dow soared today, with tech stocks leading the charge. Except that the day ended down by 200 points.

Rolex who?

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Best Buy had a particularly impressive quarter but is it really all because of Apple and it’s highly coveted watch? Hmmm. Apparently, the Apple Watch has been quite a hit with the retailer and by the end of September you can stop into any one of Best Buy’s 1,000 plus locations and pick up the gadget. That much coveted watch also helped propel Best Buy’s online sales to a 17% increase, giving Amazon and Walmart a cyber run for their money. Of course, not all those sales were from Apple products, but still. Apple doesn’t get all the credit since Best Buy also scored some impressive appliance sales. And I’m pretty sure Apple doesn’t make refrigerators and dishwashers. Yet. The Apple thing really seems to be paying off for Best Buy so it seems logical that it will be increasing Apple’s presence in its stores and start to offer AppleCare and service in some extremely lucky locations. Best Buy earned a $164 million profit adding 46 cents per share. Analysts only expected 34 cents. Apparently those analysts don’t own an Apple Watch (nor do I, for that matter). A year earlier Best Buy raked in $146 million and 42 cents per share.

Let them eat cake…

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If you’re traveling to Paris after October 1 (lucky you) and your accommodations come courtesy of Airbnb, be prepared to say au revoir to even more money than you might have planned. Your Parisian host will now be collecting a tourism tax from you in the amount of 83 euros per day, per person. In case you were wondering, because I know you were, 83 euros is equal to about 95 cents. Paris authorities made the request to Airbnb in an effort to encourage the home-sharing site to behave more like a hotel would. And, well, considering that Paris is the most visited city in the world, and Airbnb has over 50,000 listings there, it seems like the smart thing to do to comply with this request. Besides, that tourism tax helps generate local tax revenue and pays for all the extra infrastructure that results from tourism. Also, it gives Parisian hotels one less thing to complain about when it comes to the advantages of Airbnb and helps the site make nice with French authorities. Incidentally, New York attorney general Eric Schneiderman has taken issue with the $25 billion company. Schneiderman said that 75% of New York City listings are, in fact, illegal, since the hosts are/were not present and the rental periods were for less than 30 days. According to New York State Law, these tenants owe Uncle Sam some $30 million.

All fall down…

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Fewer things are uglier than a 1,089 point plunge on the dow. And that’s just how Monday started off, within the first few minutes of trading. By closing, however, the market was down only 588 points. Phew. Apparently the market is correcting itself, so the drops shouldn’t be too alarming. Also don’t look too much into last week’s 1,000 point drop. At least that’s what the experts are saying. The term “correction” is meant to reassure us. So are you reassured now? But correction or not, overnight there was a big sell-off in China that brought about a very unsightly 8.5% hit to the Shanghai Composite Index which the Chinese media is very unaffectionately calling “Black Monday.” Yes. It’s that bad. And worse since the repercussions of this hit are spreading through Europe, and yes, even our shores. Feel free to cringe now. The world’s second biggest economy is slowing a little too much for our liking. Countries that depend on China to buy its commodes and luxury goods companies that have enjoyed selling to the Chinese are now freaking out and revising their outlooks. Although, Apple CEO Tim Cook graciously pointed out, much to the delight of Wall Street, that the Chinese are, in fact, still buying, albeit, at a slower pace and that Apple actually had a record few weeks in China. Well, lucky Apple.

As for that rate hike…

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Whether you see it as a good thing or bad thing, plans for Janet Yellen and the Fed to hike rates in September just might have hit a wall thanks to the financial turmoil rocking the world as of late. Sell-offs, swings and losses (oh my!) just might have done the trick to put the kibosh on the Federal Reserve’s intention to raise rates next month, at least according to investors, who probably know a thing or two about that. In fact, that hike is now looking like it will take place around March. It’s all sort of ironic since the Fed seemed almost non-plussed about China’s fiscal comings and goings because the U.S. economy was the hogging the spotlight for the way it’s been picking up speed lately. Oh well. Guess that thinking caught up with the Fed. Incidentally, Starbucks CEO Howard Schultz, always at the forefront of the cause du jour, sent out an email advising employees to be sensitive to investors who seem a bit edgy, not from caffeine withdrawal, but rather from the volatile global market situation. He writes: “be very sensitive to the pressures our customers may be feeling, and do everything we can to individually and collectively exceed their expectations.” Can I get a kumbaya?

Scrumptious…

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Chipotle’s got a plan. But this one has nothing to do with adding to its millennial-appealing menu. That part seems to be covered. It seems that a stronger economy, an increased demand for restaurant dining and a minimum wage increase across states and companies has put quite the crimp in the talent pool for Chipotle employees, resulting in fewer applicants and not enough workers to dish out the aforementioned millennial-appealing fare. To combat that, Chipotle is launching a “National Career Day” where on September 9, the Denver-based chain plans on hiring some 4,000 new employees. The company is hoping to attract talent with this latest initiative, throwing around terms like “six-figure salaries” for high-performers to earn (far) down the road. Chipotle’s already part of the the Starbuck’s led 100,000 Opportunities Initiative. Starbucks, McDonald’s, Wendy’s and a slew of other companies have all been offering up all kinds of new interesting perks to attract a greater talent pool, from college reimbursement to more paid vacation. Al things I can certainly appreciate. Chipotle already employs about 60,000 people and on September 9 the company will likely increase its workforce by 7%. All you have to do is register at http://www.nationalcareerday.com. All U.S. Chipotle restaurants will conduct interviews between 8 and 11 am and if you land a gig, look forward to making more than $10 per hour to start.

How crude…

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The price of a barrel of oil has hit a new low and that’s good news. Or bad. It all depends on where you’re coming from. Literally. For the bargain price of $41.92, you could get yourself a whole barrel of oil. A year ago that same barrel of oil would have set you back $100. That is definitely good news for drivers. Not so much for places like Texas and North Dakota where hundreds of thousands of people there are employed by the industry and where there have been a lot of job cuts as a result of the dropping energy prices. By the way, according to the AAA, the national average for a gallon of gas is $2.62. Enjoy it while it lasts. Problem is, there is way more supply than demand. Despite the large supply of oil, OPEC insists on continuing to pump out its stash that won’t be needed. But OPEC’s freaking out and thinking this is the best course of action. Then there’s the shale boom right in the United States. Again. More energy. Declining demand. Which brings us to Iran. Now that the U.S. is playing nice with the human rights-violating country, you can expect Iran to unleash its supply, as well. But wait. There’s more. Maritime surveillance seems to be indicating that Iran has been hoarding its oil supply. It’s thought to have 50 million barrels, instead of the previously estimated 40 million barrels. Once Iran complies with nuclear demands it gets to unleash its stash and make an ungodly amount of money of it. Which is just what you want to happen to an authoritarian regime, with terrorist ties, that doesn’t recognize the rights of women, gays and other religions and ethnic groups.

Brokerages behaving badly…

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Today, instead of banks behaving badly, we bring you brokerages behaving badly. This time we turn pour attention to St. Louis-based Edward Jones, a firm that boasts 7 million clients, 13,000 of whom got bilked by the firm between 2009 – 2012. According to the Securities and Exchange Commission, these 13,000 customers had the bad fortune of getting overcharged by the 93 year old firm when they purchased new municipal bonds. So not cool. The United States’ muni-markets is an estimated $3.7 trillion market. Edward Jones now has the dubious distinction of becoming the first defendant in a case where the SEC comes against an underwriter for pricing-related fraud in the municipal securities market. So congrats, Edward Jones. That’s quite an achievement. Clients were overcharged by a whopping $4.6 million for these new bonds and now Edward Jones gets to pay it back. And then some. The firms has to pay $20 million in a settlement including returning $5.2 million to the affected customers (some of whom have already left the firm). Also named in the settlement was Stina Wishman, who headed the firm’s muni-bond desk at the time clients were over-charged. She received a $15,000 fine and is barred from working in the securities industry for at least two years. Can’t wait to see how she updates her LinkedIn profile.

Cavities…

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Just because you’re sitting at you desk procrastinating by playing Candy Crush, doesn’t mean the rest of the world is. King Digital, the company behind the addictive mobile games just released its second quarter profit and they were anything but…sweet. The company’s quarterly profit took a 28% beating down to $119.3 million and 38 cents per share on $489.5 million revenue. Analysts predicted the company would score $134.3 million at 42 cents per share on $482.4 million in revenue. At least the revenue take-in wasn’t as brutal. But last year at this time the company raked in much better digits when it saw $165.4 million in profits with 52 cents added per share. It didn’t help that King Digital’s monthly unique visitors fell 7% to 340 million. That and a strong dollar sent shares down over 8% today.

Who would have thought…

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I could have sworn there was a time when Alibaba was the reigning IPO darling. But a lot has changed since its very very auspicious Wall Street debut. One of those changes is China’s economy – which has been on a very unpleasant decline. When a country’s economy starts heading south you can bet people in that country aren’t spending as much a retailers would like them too. When you’re China’s biggest e-commerce site…well, then you have problems, like for instance experiencing the slowest growth quarter in three years. Hence, Alibaba had a big gaping earnings miss. The company saw a 28% increase in revenue to $3.27 billion, except analysts forecasted $3.39 billion. However, the company manged to still double its net profit to almost $5 billion, adding 59 cents per share. Forecasts were for 58 cents. But, like I said, there was still a big glaring earnings miss that sent shares to a brand-spankin’ new low. If that isn’t bad enough, when a powerhouse like Alibaba disappoints, other major Chinese companies, even non-Chinese companies that do big business there, tend to suffer the consequences as well. Many of them saw their shares take a hit on Alibaba’s bumming news.

Waste not want not…

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This just might be the best news you’ve heard all day…depending on how you look at it. The national budget deficit for July is just $149.2 billion. If that’s not enough to question where your taxpayer dollars are going, then I don’t know what is. Last year, however, the government only saw a July deficit of $94.6 billion. So what gives? The answer isn’t all that bad, in fact. There were $42 billion in payments that were made in late July as opposed to August since the first day of August fell on a Saturday. And everybody knows it’s hard to get paid on the weekend. So the government graciously made those payments a wee bit early. How considerate. But if you still find that deficit a little bit high for your liking, then consider the fact that 2015 could end up being the lowest full year deficit in eight years. After all, the economy’s beefing up a little, most people are gainfully employed and, because of it, paying more in tax revenues. The full year deficit for 2014 was $483.3 billion, which was actually down from 2013’s $679.5 billion. If you are simply aghast at those figures then clearly you’ve forgotten that the deficit was above $1 trillion in the years prior to that.

Banks behaving badly…

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Citizens Bank to pay a very big fine. But the shocker here is that it had nothing to do with bad mortgages that led to the 2008 fiscal nightmare. Instead, Citizens Bank, which is among the United States’ top twenty banks, very greedily helped itself to some cash that, quite simply, didn’t belong to them. It was back in 2008 when the bank began engaging in its fiscal shenanigans. Customers would make deposits, but there were times when the amount on the deposit slip didn’t quite match the actual amount of the deposit. That’s when Citizens Bank would pocket the difference instead of crediting the customers’s accounts. Six years later, three federal agencies got wind of their activities thanks to a very brave whistle-blower. Citizens Bank has to now return $14 million to the customers it bilked in addition to paying another $20.5 million in fines.

If you google alphabet…

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In case you missed it, there’s a new head honcho at Google. Okay, maybe not as head honcho-y as Sergey Brin and Larry Page, but Sundar Pichai just became the new CEO of Google and now holds the keys to that very magical kingdom. There is also a little bit of restructuring going on at the almighty tech company. Okay. A lot. You see, Google has now become a subsidiary of a new publicly traded company called Alphabet Inc. – which will soon be trading under that name. Brin and Page are at the top of that executive food chain and, no doubt, always will be. Pichai is no rookie, though. He’s been at Google for well over a decade and his last role was as head of Android. So he’ll probably settle into his new digs quite comfortably. Apparently, Wall Street likes the new arrangements too. Google’s stock surged 6% on the news.

Take a dow…

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A big shout out goes to Warren Buffet today, who together with rebounding oil prices, got the dow to shake off a fiscally ugly seven day slump. First, crude finally climbed 2% to a respectable $44.74 a barrel after falling below a very unflattering $44 a barrel on Friday. Then the Oracle of Omaha reminded the world why Berkshire Hathaway is, in fact, the happiest place on earth (sorry Mickey) when his company announced a $37 billion deal to buy Precision Castparts. The company was purchased at a 20% premium, but no doubt worth every…billion. Precision Castparts took in $10 billion in sales with a $1.5 billion profit in 2014.

Going postal…

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It used to be that postal workers were unstoppable in their pursuit of mail delivery. As the saying goes: “Neither snow nor rain nor heat nor gloom of night…” Noticeably absent from this list is Congress, which just might be the one thing that could put a crimp in those mail deliveries. You see, the United States Postal Service just announced its quarterly earnings. It lost $586 million. But, that was still a major improvement over last year at this time when the agency took a $1.5 billion hit. Ouch. April-June, however, typically sees lower revenues, so that figure wasn’t totally alarming. Part of the reason why USPS didn’t lose as much is because of how the interest rates that are tied into worker compensation expenses. Go interest rates! Now let’s get back to Congress. Strangely enough, even though the USPS doesn’t receive any tax dollars, the agency is still under congressional control. Under that congressional control we find the Postal Accountability and Enhancement Act. Say that five times fast. The “Act” stipulates that USPS must pay between $5.4 billion and $5.7 billion toward future retiree health benefit costs. Until 2016. Unfortunately for the USPS, there have been a lot of changes in the mail and package delivery industry and the agency is facing stiff competition, including from many start-ups. Congress has yet to acknowledge these shifting postal tides and draft new legislation that would tweak that multi-billion requirement to a more attainable fiscal goal. Until that happens…well, it’s Congress so don’t hold your breath.